Dynegy Reaches Key Regulatory Milestones in Sithe Energies Transaction

Business Wire, Jan 17, 2005

HOUSTON -- Dynegy Inc. (NYSE:DYN)

--FERC approves acquisition

--New York State Public Service Commission rules that it will not further review transaction

Dynegy Inc. (NYSE:DYN) today announced that it has received approval from the Federal Energy Regulatory Commission (FERC) with respect to the company's previously announced plans to purchase from Exelon Corporation (NYSE:EXC) all of the outstanding capital stock of ExRes SHC Inc., the parent company of Sithe Energies Inc. and Sithe Independence, L.P. In addition, the New York State Public Service Commission (NYPSC) has ruled that it will not further review the transaction.

The FERC approval and the NYPSC ruling, received on Jan. 13 and Jan. 14, respectively, represent the final regulatory milestones in the approval process. On Dec. 14, 2004, Dynegy announced that the Federal Trade Commission had allowed the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 to expire in connection with the transaction. Dynegy expects the transaction to be completed in the first quarter 2005.

Through the acquisition of ExRes SHC Inc., Dynegy will acquire Sithe Energies, which includes the 1,042-megawatt, 7,211-Btu heat rate, combined-cycle Independence power generation facility located near Scriba, N.Y., four natural gas-fired merchant facilities in New York and four hydroelectric generation facilities in Pennsylvania.

In addition to Sithe Energies, Dynegy will acquire Sithe Independence, L.P., which holds a 750-megawatt firm capacity sales agreement with Con Edison, a subsidiary of Consolidated Edison Inc. The capacity sales agreement, which runs through 2014, provides annual cash receipts of approximately $100 million. Sithe Independence, L.P. also holds power tolling and financial swap contracts with a subsidiary of Dynegy. While these contracts will remain in effect, the acquisition by Dynegy will transform the tolling and swap contracts into Dynegy intercompany agreements, substantially eliminating their financial impact by retaining the net cash flows within 100 percent-owned Dynegy companies.

The financial terms of the agreement include the payment by Dynegy of $135 million in cash and the consolidation of $919 million in face value project debt. The principal and interest payments related to the consolidated debt will be substantially funded through 2014 by the proceeds from the long-term capacity sales contract with Con Edison.

Dynegy Inc. provides electricity, natural gas and natural gas liquids to customers throughout the United States. Through its energy businesses, the company owns and operates a diverse portfolio of assets, including power plants totaling 11,650 megawatts of net generating capacity and gas processing plants that process approximately 1.8 billion cubic feet of natural gas per day.

Certain statements included in this news release are intended as "forward-looking statements." These statements include assumptions, expectations, predictions, intentions or beliefs about future events, particularly the statements concerning the consummation of the Sithe acquisition, the impact of the acquisition on the company's related tolling and financial swap arrangements and the funding of the Sithe project debt with proceeds from the Con Edison capacity sales contract. Dynegy cautions that actual future results may vary materially from those expressed or implied in any forward-looking statements. Some of the key factors that could cause actual results and the periods affected to vary materially from those expected include the satisfaction of the remaining closing conditions relating to the acquisition and the receipt of the proceeds from the long-term capacity sales contract. More information about the risks and uncertainties relating to these forward-looking statements are found in Dynegy's SEC filings, including its Annual Report on Form 10-K for the year ended Dec. 31, 2003 and its Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2004, each as amended, which are available free of charge on the SEC's web site at http://www.sec.gov. Dynegy expressly disclaims any obligation to update any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date of this release, except as otherwise required by applicable law. DYNC.